Al Baraka Banking Group profits hit by currency woes

Al Baraka Banking Group (ABG) reports 2017 2017 was an exceptional year regarding the fall in local currencies of a number of Arab and Middle East countries where ABG units operate. The bank’s profits, therefore, were affected by the decrease of local currencies of four major banking units of the Group against the US dollar, reflected in the reported figures of profits in US dollars for 2017 compared to the same period in 2016.

Total operating income decreased by seven per cent to reach $1 billion compared to $1.1 for the same period a year earlier, net operating income by 15 per cent to $430 million from $507 for the year 2016, net income by 23 per cent to $207 million compared to $268 million for the year 2016 and net income attributable to equity holders of the parent by 15 per cent to $129 million in 2017 compared to $152 million in 2016.

In addition to the effect of the decline in local currencies, net income was also affected by the increase in the amount of prudential provisions. If the effect of the devaluation of local currencies on US dollar income indicators is excluded, total operating income would increase by 11 per cent, net operating income by seven per cent and net income attributable to equity holders of the parent by seven per cent.

Total assets grew by nine per cent to reach $25.5 billion compared to $23.4 billion at end of 2016, though the growth rates of these assets were also affected by the decline in value of local currencies in some countries where the group operates. Customer accounts as at the end of December 2017 also increased over December 2016's level by eight per cent and reached $20.7 billion compared to $19.2 billion, representing 81 per cent of total assets. Total equity reached $2.5 billion at the end of December 2017, increasing substantially by 25 per cent compared to December 2016. This reflects the issuance of a $400 million Additional Tier 1 Perpetual Sukuk by the group during May 2017. Total equity to total assets ratio reached 10 per cent at the end of December 2017.

HE Sheikh Saleh Abdullah Kamel, Chairman of Al Baraka Banking Group said, "We are pleased with the financial results achieved by the Group in 2017, given the slowdown in global economic growth, the continuation of a number of political and economic risks surrounding the countries in the region, and the operational conditions of some of our units.”

Abdulla Ammar Al Saudi, Deputy Chairman of ABG said, “From the beginning, the Group has followed an approach that is characterized by wisdom and hedge based on the continuation of cautious expansion and growth strategies with focusing on assets quality, and at the same time, building human, technical and material capabilities of the Group to face the various risks.”

Adnan Ahmed Yousif, Member of the Board of Directors and President & Chief Executive of Al Baraka Banking Group said, "ABG has encountered many challenges during 2017, most notable is the depreciation of currencies in some countries in which our units operate, which affected the growth rates of the balance sheet items and income. We have been able to compensate for this effect by increasing the volume of business in the Group units significantly. Therefore, we consider the results that we achieved during 2017 are good, given the excellent profits results reported by the most of our units in their countries. Based on the performance of our units, we are now confident that the Group owns strong fundamentals, sustainable resources and a wide geographical diversity that will enable us to continue to grow and achieve good profits and also to continue maximizing the returns to our shareholders and investors in the coming years.”